OR expands tax breaks for some

SALEM — On May 21, Gov. Kate Brown got her wish to expand an existing business tax break that will cost the state $11.3 million in 2018.

During the eight-hour special session, the House of Representatives voted 51-to-8 and the Senate voted 18-to-12 to pass the tax break for certain sole proprietorships via House Bill 4301.

“It was really clear in general that Republicans wanted more — more tax breaks for small businesses,” Brown said. “The Democrats wanted different or more revenue-neutral proposals. We weren’t able to reach a compromise in those conversations so we went with my very simple, straightforward proposal.”

Brown, who is seeking reelection this year, called the special session after signing another tax bill — Senate Bill 1528 — in April that was unpopular with some members of the business community.

That bill eliminated a 20-percent business tax deduction that was included in federal tax reform earlier this year and would have resulted in the loss of $200 million to $300 million in state revenue. Oregon’s tax code automatically conforms with federal code unless lawmakers specifically pass legislation to change it.

The governor said while she was considering Senate Bill 1528, she realized that state lawmakers needed to expand the state’s lower tax rate for “pass-through” businesses to sole proprietors.

Expanding the tax break will cost about $11.3 million in 2018, $11.8 million in 2019 and $12.5 million in 2020. The cost continues to increase each subsequent year, said Chris Allanach, acting legislative revenue officer.

Many House Republicans criticized the governor’s decision to sign Senate Bill 1528 into law and to call a special session on an issue that isn’t an emergency.

“I think we can all agree that this is an emergency manufactured by the governor,” said State Rep. Knute Buehler, R-Bend, who is challenging Brown in the governor’s race this year.

State Rep. Phil Barnhart, D-Eugene, said the bill makes an important fix.

“This bill only deals with an omission from the 2013 law that will make it fairer for the businesses that choose to organize as sole (proprietors),” Barnhart said.